A time capsule of the greatest financial mania in the history of mankind, told in real-time by regular folks and patriots. May future generations better understand the madness of crowds, and how power and money corrupt.

June 08, 2007

NEW YORK (AP) -- Homebuilder shares tumbled Thursday after interest rates rose, making it more likely that demand for new homes will ebb further and housing prices will continue to fall.

The sector was also jolted when yet another major builder withdrew its full-year orders and deliveries estimates, givinginvestors more reason to think the industry won't find the long-sought bottom of its nearly two-year slump any time soon.

The pool of would-be home buyers has already been drying up as banks tighten lending criteria amid a meltdown of the supreme mortgage sector, which lends to people with spotty credit histories. Other buyers have been staying away as home prices fall because they do not want to invest in an asset that may depreciate.

With demand ebbing and the sector faced with an inventory overhang after heavy building activity during the boom years, housing prices are certain to continue falling in large swaths of the country."We think homebuilders will respond even more aggressively on pricing in the coming months in an attempt to increase absorption and clear excess inventory," Ban of America analyst Daniel Oppenheim wrote in a note to investors

41 comments:

The pool of would-be home buyers has already been drying up as banks tighten lending criteria amid a meltdown of the supreme mortgage sector, which lends to people with spotty credit histories. Other buyers have been staying away as home prices fall because they do not want to invest in an asset that may depreciate.---

A single mom co-worker (kid grown and moved out) just bid on a rehabbed modest starter rowhouse starter in Baltimore. The seller bought at $40k and asked $150k. She low-balled 'em!

This actually sounds like, no matter how it falls out, she should be OK. The payments are going to be awful close to her old rent. Also, Baltimore is anticipating an influx of people because of a military base switcheroo. The city has begun plowing under swaths of empty houses, too. Might actually be a rare example of a smart buy. Baltimore didn't see as bad a bubble as DC, but there was a run-up.

For anyone who thinks institutions or the government can't take your PM, good luck:

LME steals Nickel in Broad Daylight!Media too Dumb to Notice Silver Stock Reportby Jason Hommel, June 7, 2007An ominous development took place today that clearly shows how important it is to take physical delivery of your silver, in person, and store it in your own safe.

The LME declared that two people who own more than 25% of the remaining nickel at the LME must lend some of their nickel! Imagine that! "MUST LEND" sounds like a "forced theft" taking, to me! If you store your stuff at another person's place, they can just "up and declare" what you can, and cannot, do with it. Can't keep it, must lend it? Truly astounding. It's almost as if those who own the nickel, don't really own it, but rather, the LME owns it, if it is in "LME approved" warehouses.

Be astounded at the news headline, it reads as if it's right out of a "Ripley's Believe it or Not!" book. The authors of the articles write as if they are totally clueless about the content of what they are saying. (Maybe they are too close to the action, or even accomplices?)

From the article- "When Treasury yields rise, yields on bonds backed by mortgages tend to rise more. Higher morgage rates make it less likely thomeowners will either refi or buy a new home. Fewer prepayments mean morgage investors risk holding more on their books than expected. To counter that they readjust by either selling mortgages or selling Treasuries as a hedge. Both of those things drive Treas. yields and mortgage rates higher..."

Someone should tell jack@ss' neighbor to throw an extra 5% in to comp for yesterdays. Also, he won't have to worry about the taxes on his "gains".

Securitization of Mortgages Drives the Foreclosure Wave, Blocks RenegotiationJune 7, 2007 (LPAC)--In a Reuters review, Wall Street figures including the bond trader supposed to have "invented'' mortgage-backed securities (MBS) in the 1970s, clearly acknowledged the truth Federal regulators have been dancing around: The massive securitization of mortgages since 2000 is now driving the "foreclosure tsunami,'' and blocking the renegotiation of defaulted mortgages to save homes. This brutal fact has also been seen in the fight between Bear Stearns investment bank and a group of hedge funds, led by the Paulson fund. The hedge funds have bought masses of the MBS; the investment banks and servicing banks, on the other hand, are now under Congressional pressure to renegotiate mortgages to avert foreclosures.

Banks and mortgage companies made profits multiple times on the massive wave of subprime, "Alt-A,'' and adjustable-rate and other unconventional mortgages, first by charging higher interest rates to home buyers, and then by packaging and reselling the mortgages as securities. Now the legal covenants of those securities prevent renegotiating the mortgage terms and payments, according to MBS "inventor'' Lewis Ranieri, and other mortgage experts interviewed by Reuters. "Once you sell it'' [securitize the loan], "the accounting says you can't go back and touch it,'' a Rice University professor told the news service. The securities holders--hedge funds, private equity, and other kinds of funds--can block renegotiation, which can't even be proposed until the underlying mortgage is in default.

The research firm Housing Predictor, Inc., based on a survey of 100 U.S. metropolitan areas in May, has forecast two million more foreclosures nationally, essentially agreeing with an earlier forecast by the Center for Responsive Lending, of a wave of 2.2 million more foreclosures coming. This would take the 2006-09 foreclosure "tsunami'' to 3 million, larger than the one which hit when the U.S. savings and loan bank sector collapsed in the middle 1980s.

Mmmm, watching the interest rates explode and locking the whiners out of the market forever...sweet. Yeah, people never buy depreciating assets like cars or plasma TVs...everyone in this country only makes wise investments, amirite? (/endsarcasm) Of course, HP readers are all rich folks making 6 figures sitting on mountains of cash...gotta love the interweb. :)

Most houses are built by small outfits, and they are the ones that will fold first because they have little capital and no access to Wall Street credit. In the past month I've noticed signals that many are nearing the end of their rope as houses sit with no takers.

Some are selling their empty lots with cheap little FIZBO signs, and one builder is now offering his unfinished houses as an "investment opportunity". I guess the idiot never considered that "investors" might wonder why if it's such a good deal. he wants out.

Yesterday's stock market setback was attributed to a change in investor sentiment as to the next fed move. They figured the fed would cut rates to save housing. FOOLS! The Thinker has been saying this for a long time, the Fed's primary objective is to protect the wealth of the rich lenders by keeping inflation down to a reasonable level.

High inflation helps the indebted class by lowering the value of their debt relative to their income. As they live pay-check-to-pay-check, they have no savings to be devalued, only debt. The FBs will especially stand to gain by inflation because it lowers the value of their debt relative to the value of their house.

We must understand who the Fed is out to help. We will see 7% interest rates before we see 4% again.

High inflation helps the indebted class by lowering the value of their debt relative to their income. As they live pay-check-to-pay-check, they have no savings to be devalued, only debt. The FBs will especially stand to gain by inflation because it lowers the value of their debt relative to the value of their house.

----------------------------------

BINGO!!!

All you smart-asses saving your money in 5% CDs are about to get wiped out when inflation hits 10% or who knows how high. Yet the so called FB who has a 6% (4% after-tax) loan will be laughing. Well actually he'll have no clue what's happening but he'll wake up one day with a loan that's worth 1/2 what it was when he got it and house worth twice as much as what he paid for it.

And what will you all have? 1/2 the money you thought you had paying twice the rent you are paying today.

Anonymous said... WOW what a crash. 400 points which is 3% after going up 10% from the last "crash" in February.

Markets soaring this morning.

Keep holding those 5% CDs idiots.

Ever hear of diversification brainiac? Spread the risk ring a bell? Don't put all your eggs in one basket? If you are fully invested in the stock market, you are a dumbass who will at some point have your head handed to you by the pros. Good luck with that investment strategy.

Over the last four years, private equity funds the world over have come to bid up shares regardless of value. Hedge funds have pushed junk bonds so high, they yielded record lows above Treasuries at the end of last month. Outstanding bets on derivatives contracts now outweigh the entire global economy eight times over, according to the latest BIS and IMF data.

What might happen if a handful of these credit-fuelled promises fails to pay up? Perhaps we got a glimpse this week, when yields on 10-year US Treasury bonds – the global benchmark for the price of money ever since gold was cut out of the monetary loop – rose above 5% for the first time since August.

That move in the medium-term price of Dollars came thanks to Treasury prices falling, of course. And with the value of risk-free investments sinking, higher-risk assets sold off fast, too.

"Everything has to do with interest rates at the moment," gasped one credit trader at J.P.Morgan to Bloomberg. "People are reducing their high-yield holdings in light of the risk-free rate at 5%."

"a.creampuff said... A single mom co-worker (kid grown and moved out) just bid on a rehabbed modest starter......Baltimore didn't see as bad a bubble as DC, but there was a run-up."

Just a "run-up," that's ALL? Baltimore went NUTS! I sold an inherited dump of an abandoned apartment house in that cesspool for 4-5 times appraised value. It is now listed by Zillow at 2.5 times my selling price.Baltimore need to tumble, BAD!

That's what people in Atlanta say as well. We never saw the 20% a year appreciation. That being said there are more homes than ever for sale, Clayton countu might as well be renamed Foreclosure County and I just refuse to believe there are enough people making $100K and up to justify $500K condos that are sprouting up everywhere.

Homes price fall, yeay. But oops mortgage rates skyrocket. So this year you can afford a $300K home at 6%. Next year that home is $200K and guess what at 9% you can only afford a $200K home.

I fail to see what all the celebrating's about. Unless you have $200K in the bank - and I'm sure some of you do - you will have gained nothing long term.

Once again, the braindead realtroll shows his stupidity.

1) If you buy a house for $300K at 6% and the rate drops to 5%, you can refi and save 1%. You are stuck with the higher price house and a good rate. If you buy the same house for $200K and 9% a year later, and the rate drops to 5%, you refi and save $100K one the price and get the same 5% great rate.

2) You also get a much bigger mortgage deduction with the higher rate and lower principle, yet both payments would be the same.

3) Let's say the same house is worth $400K in ten years. The buyer at $300K made a 33% profit. The buyer at $200K made a 100% profit.

Do you realtroll morons get it now? It should be very easy to wrap that around your pea-sized brain

"All you smart-asses saving your money in 5% CDs are about to get wiped out when inflation hits 10% or who knows how high. Yet the so called FB who has a 6% (4% after-tax) loan will be laughing. Well actually he'll have no clue what's happening but he'll wake up one day with a loan that's worth 1/2 what it was when he got it and house worth twice as much as what he paid for it.

And what will you all have? 1/2 the money you thought you had paying twice the rent you are paying today.

Brilliant!!"

You think that higher inflation, which means higher interest rates by the way won't impact real estate? Go get an education - ahole.

1) If you buy a house for $300K at 6% and the rate drops to 5%, you can refi and save 1%. You are stuck with the higher price house and a good rate. If you buy the same house for $200K and 9% a year later, and the rate drops to 5%, you refi and save $100K one the price and get the same 5% great rate.

2) You also get a much bigger mortgage deduction with the higher rate and lower principle, yet both payments would be the same.

3) Let's say the same house is worth $400K in ten years. The buyer at $300K made a 33% profit. The buyer at $200K made a 100% profit.

You are the one sounding like a reator and/or mortgage broker moron. Don't worry about the interest rate you can always refinance. Sounds so close to "don't worry about the ARM reset, you can always refinance".

5% is history. There's a better change of 10% rates than 5% rates showing up in the next 5 years.

First of all, learn how to spell, you dimwitted troll. Secondly, the point was that it is better to have lower prices and higher rates than higher prices and lower rates. Third, there will come a time when buying will be better than renting. That will be when rates are high and prices are low. Now, back to your rented double-wide, you filthy ignorant piece of white trash. Leave the library computers for people who want an education.

My parents got a great bargain in 1983 by buying when the mortgage rates were 19% - they got a 4 bedroom house for $60K. They were able to refinanced at 9% a few years later which nearly cut the payments in half. They sold back in 2004 for $420K when they retired.

So it is better to get a lower house price at a very high interest rate. The odds are in your favor that over the next 10 years the rates will drop to the 6% range again. Your other choices are to rent forever, which is stupid if you have a family, or buying at ridiculously high prices. Don't listen to the lying monkey realtors and mortgage brokers/bartenders when they try to convince you to buy now before rates go back up. Let the rates go back up and get the lower prices. You can't refinance a $700K pricetag into a $400K pricetag, but you can refinance a 10% rate into a 6% rate.